I often cringe when economists or other social scientists make predictions about future outcomes. Nevertheless, provocative postulations that draw ire always pique my interest. In a Wall Street Journal op-ed, economist Robert Gordon argues that the growth rate experienced in the United States between 1891-2007 is not going to return any time soon. Innovation – the engine of US productivity – will not be sufficient to sustain the 2% annual growth rate of output per person during this period. Not surprisingly, Gordon’s thesis received many boo’s and hisses from commentators.
Paul Krugman’s polite denouncement of Gordon’s claim seems slightly off target. In my reading of Gordon’s argument, techno-pessism is not the primary explanatory variable for why growth won’t match previous rates. Innovation will continue. However, the new technologies simply won’t produce seismic shifts in consumer spending and worker productivity. The pool of those who benefit from innovation is going to get smaller and smaller in coming decades.